The rate bank charges varies from one bank to another bank, and between different types of customers. The bank have various types bank customers on their records, of which they include the business customer and then the personal customers.
Rates Of Bank Charges On Different Customer Type
Business Customer – There is what they call Bank commission called commission on turn over (COT) which is charged for cheques drawn, standing order and direct debit. The current turn over of bank charges is about $5.00 per every $1,000 drawn. The recorded Lower rates of bank charges are usually negotiated with larger business customers like Fleet Farms.
Here are possible terms of agreement;
- The bank might agree to reduce its commission if the business customer keeps a credit balance on its account throughout the period. In fact new generation banks pay interest on current accounts with credit balance.
- Before now commission is usually charged to the account quarterly in arrears but with the recent developments and prudential guideline coming on board banks now charge commission on monthly basis.
- Management fee is charged for additional services. For instance, negotiation fee will be charged for the time spent by bank officer in dealing with a lending proposition.
- An overdraft administration fee will be charged if the customer account gets overdrawn without prior permission from the bank.
- Overdraft commitment fee will also be charged.
- Legal fee. The legal department usually charge fee for perfecting security documents and other agreement papers.
With the ever developing banking industry, the Islamic banks have come up with the interest free banking business. That is to say that banks should not collect any interest, commissions, fees for any of the lending services rendered to the customer. The question now is how do the banks meet up with its administrative expenses and at the same time rewards the shareholders of the bank.
Personal Customer – Banks do not charge commission on credit accounts until when a debit goes into the account. Commission is charged monthly but in arrears if the customer incurs an overdraft during the period.
Charges And Interest On Overdraft
Interest on overdraft is different from interest on loans, it is so when compared with the circumstances the law binding the type lending process. The reasons are that the interest on overdraft is charged based on the number of days the account is in debit, in essence when the account holder has his account in debit, the number of days the account stays determines the level or the amount that will be charged. And also until the customer withdraws in excess his personal money in the account. The same cannot be said on loan, it is unlike loan advances where approval money in the account.
This is unlike loan where approval is given and all the other necessary documents are satisfied all correct. The bank credit officer now credit the customer’s account and debits loans account created in the name of the business or personal customer. This can be discovered if a proper calculation is carried out on the process of interest on overdraft.